What's Happening?
Vietnam is set to launch an online gold exchange and permit private companies to import gold for the first time in over a decade, starting next month. This initiative aims to stabilize domestic gold prices, which have surged by 60% this year, and align them more closely with international rates. The State Bank of Vietnam is exploring international models to establish the exchange, with potential trading on the Mercantile Exchange of Vietnam or a planned international financial center. The move is part of broader efforts to maintain macroeconomic stability and prevent asset price bubbles, as rapid credit expansion poses risks. A government decree will allow qualified companies to import gold, ending the central bank's monopoly on gold bullion production.
Why It's Important?
The introduction of an online gold exchange and the allowance for private gold imports are significant steps for Vietnam's economy. These measures could help balance gold supply and demand, potentially cooling domestic prices and narrowing the gap with global markets. However, increased gold imports may exert pressure on the exchange rate due to the outflow of US dollars. The central bank's actions reflect a strategic shift to diversify gold supplies, enhance market competitiveness, and ensure transparency. This development could impact Vietnam's economic growth by mobilizing private resources and stabilizing asset prices.
What's Next?
The central bank plans to issue gold import licenses and set annual quotas for qualified companies starting October 10. It will also tighten controls over gold trading firms to prevent illegal activities such as money laundering and speculation. The decree aims to diversify gold supplies and increase market transparency. The central bank's monopoly on gold bullion production will end, fostering competition. Economists warn that while more imports could stabilize prices, they might also affect the exchange rate due to increased dollar outflows.
